Talk of 4th telco dies in the air

Remaining 3G spectrum to be shared by SingTel, M1 and StarHub

The doors to a fourth local mobile operator have now closed and Singapore’s telco scene will remain a three-cornered fight among Singapore Telecommunications, M1 and StarHub.

The Infocomm Development Authority of Singapore (IDA) yesterday announced that it would allocate the country’s remaining third-generation (3G) cellular network spectrum to the three incumbent operators in the absence of other rivalling bids.

Three lots within the 1,900 to 2,100 MHz (megahertz) frequency range were supposed to go under the hammer but the regulator received only one offer each from SingTel, StarHub and M1 when the registration deadline passed on Monday.

‘No more than one initial offer was made in respect of each of the three 3G spectrum lots available for allocation. Therefore, the 3G spectrum rights (2010) auction will not take place,’ the IDA said on its website.

The latest development means that these lots will be allotted to SingTel, StarHub and M1 at the reserve price of $20 million apiece.

This is a repeat of the scenario in 2001 when the country’s 3G licences first went on sale.

Four spectrum lots were to be parcelled off then but the IDA’s auction plan was scrapped as it garnered only three bids in the end. SingTel, StarHub and M1 ended up paying the reserve price of $100 million each for their 3G licences at that time.

The fourth unclaimed spectrum is the one that IDA is now allocating to the three incumbents. The move is expected to boost their cellular bandwidth to cope with the explosive increase in mobile broadband consumption in recent years.

The smart phone boom, fuelled by handsets such as the iPhone, coupled with the growing use of token-like 3G modems, are placing a growing strain on an operator’s existing cellular network.

Besides giving current players more headroom, the government also wanted to see if a fourth player is willing to throw its hat into the ring.

While all three telcos welcomed the bandwidth boost, they protested against the IDA’s initial plan to conduct a second 3G auction.

Instead of bidding, they had lobbied for a non-competitive, ‘administrative allocation’ approach where the remaining 3G spectrum is distributed among the trio. Should there be interest beyond the current telco trinity, incumbents should be given first dibs at acquiring the spectrum, they said.

However, the IDA eventually stood its ground, arguing that an auction is a more objective and transparent way of allocating scarce national resources such as cellular network spectrums.

Last month, it also released more details of the auction. In particular, the IDA kept the door open for a fourth operator by giving foreign players a two-month buffer between tabling their initial bids and setting up a local office.

Despite the government’s best intentions, market watchers have repeatedly said that the chances of having another telco are slim as the local mobile scene is already mature and the incumbents have entrenched customer bases. Singapore did have a fourth operator once, in 2002, in the form of Virgin Mobile, a joint venture between SingTel and Richard Branson’s Virgin Group. However, it failed to make a dent in the market and the company pulled out within a year.

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